Real People Really Misleading in Florida

TV ads by competing outside groups employ local residents to make misleading claims about Democrat Alex Sink and Republican David Jolly in Florida’s hotly contested special House race.

An ad from American Crossroads features local residents making several distorted claims about Sink’s tenure as the state’s chief financial officer.

A couple claims that when Sink “oversaw Florida’s retirement system, our pension fund lost billions” — $27 billion. That’s wrong. The value of the assets in the pension fund decreased by $4.4 billion over Sink’s tenure, but the fund only lost value because it paid billions more in benefits than it received in contributions and investments. The pension investments gained a modest annualized return of 2.32 percent during Sink’s four-year tenure, which included some difficult years for investors. And when the market recovered, so did the value of Florida’s fund — so no money was “lost.”

A local woman claims Sink “used a state plane to get to a vacation in the Bahamas.” That’s not true. Sink flew from Tallahassee to Miami on state business, and on the return trip home, had the plane drop her in Fort Lauderdale on its way to Tallahassee, so that she could catch a commercial flight — which she paid for — to get to a Bahamas vacation.

Meanwhile, an ad from House Majority PAC features a couple in their 80s distorting Jolly’s position on Social Security.

The woman in the ad says “we really count on Social Security” and it’s not right for Jolly “to risk Social Security money in the stock market.” Jolly has said he would consider a plan that would allow younger workers to invest a portion of their Social Security taxes in private accounts. But it would not be mandatory, and it would not include current retirees.

The race to replace Republican Rep. C.W. Bill Young, who died in October, has become a spirited ad war. And with recent polls showing a very tight race, the election has drawn considerable interest from outside groups as well. In addition to Sink and Jolly, Libertarian Lucas Overby is on the ballot in the March 11 special election.

Did Sink ‘Lose $27 Billion’ from Florida’s Pension Fund?

The ad from American Crossroads, which backs Republican candidates, features several Pinellas County residents attacking Sink’s performance as the state’s chief financial officer.

The first claims come from Gigi and Connie Deneault of Pinellas County, who claim that when Sink oversaw the state’s pension as the state’s CFO, the pension fund “lost billions.”

Sink served as Florida CFO from Jan. 2, 2007, to Jan. 4, 2011. And as CFO, Sink served on the State Board of Administration of Florida, which oversees the investment portfolio (stocks, bonds, private equity and real estate etc.) of the Florida Retirement System pension fund, one of the largest pension funds in the country. Some of those were tough years for investors. The value of pension funds around the country suffered, and the Florida pension fund was no different.

The ad claims the fund “lost $27 billion” during Sink’s time as CFO. But here’s how the ad gets to that figure, and why it’s wrong. The ad cites State Board of Administration investment reports that show the value of assets in the Florida State Retirement Pension Fund at $136.3 billion in 2007 and $109.3 billion in 2010 (see Chart 9). That’s a $27 billion loss in asset value. But the SBA operates on a fiscal year, and those figures indicate the value as of June 30 of those years. In other words, those numbers capture a time frame six months after Sink took office to six months before she left office. Tacking on six months in each direction works in Sink’s favor.

Looking at the entirety of Sink’s time as CFO, the value of the assets in the pension fund went from $128.6 billion on Dec. 31, 2006, to $124.2 billion on Dec. 31, 2010, according to figures provided by SBA’s director of communications, Dennis MacKee. In other words, when you look at the entirety of Sink’s tenure, the value of the assets in the pension fund decreased by $4.4 billion (not $27 billion).

But even that doesn’t tell the full story. Over those four years, the pension fund made $14.7 billion in “net distributions.” That means it paid out $14.7 billion more in pension benefits than it received in pension contributions. So the fund only “lost billions” during that period because contributions and investment gains did not outpace the pension benefits it was paying out.

Still, the investments in the pension fund returned a positive annualized return of 2.32 percent over Sink’s tenure, again according to data provided by SBA. The investments made money. And consider: The four years Sink served as Florida CFO included one 12-month stretch (ending June 30, 2009) when the median return among all public pension funds was a negative 18 percent, according to the National Association of State Retirement Administrators.

Which gets us to the issue at the heart of the ad’s claim: How much blame does Sink deserve for the fund’s relatively weak performance while she acted as the state’s CFO? For starters, she was just one of three SBA trustees who oversaw the pension fund. The other two were then Gov. Charlie Crist and Attorney General Bill McCollum — both of whom were Republicans at the time. (Crist is now running for governor as a Democrat.)

More important, these were difficult years for all investors. So how did the Florida pension do compared with its peers? About average.

According to Alex Brown, a research manager at the National Association of State Retirement Administrators, for three- and five-year periods ended June 30, 2011, (six months after Sink left office) “the SBA pension fund returns were almost identical to the median returns for large public pension funds for those time frames.” For the three-year period ended June 30, 2011, the Florida Retirement System pension fund’s annualized return was 4.08 percent, and for the five-year period ended that day it was 4.93 percent, Brown said. That is slightly below the median for other large public pension funds, which were 4.16 percent and 5.14 percent for those same time frames. But Florida did a little better than some of the largest public pension funds, including those in California and Texas.

“The returns of a large fund, such as the FRS, that is invested in a diversified portfolio, will generally track the returns of the market,” Brown wrote to us in an email. “There may be opportunities to add value by adjusting the fund’s asset allocation, but generally, really big funds are going to experience returns that are roughly commensurate with those of the market. There is an expression that when your fund is so large, you are the market. Pension fund managers are charged with investing assets to defray the cost of the pension benefits, within an acceptable level of risk. Pension fund assets are invested using a very long time frame, which permits investors to focus on long-term results. Pension fund investment returns should be evaluated over a long time frame and within the context of the level of risk the fund incurs.”

“The market decline that took place from June 2008 through March 2009 reduced the value of portfolios of all investors who were invested in public equities and other asset classes,” Brown said.

In the ensuing years, the market did much better, and so did the investments that make up the Florida pension fund. Brown noted that the SBA, like most public pension funds, has recovered all of its investment losses during this time frame, and as of the end of last year, it held a higher level of assets than ever in its history.

State Plane to the Bahamas?

In the American Crossroads ad, Barbara and John Woodson of Pinellas County then make several claims about Sink’s time as a bank executive, accusing her of cutting “thousands of Florida jobs” while she “collected more than $8 million for herself.”

John Woodson: And when Sink was a bank executive, they cut thousands of Florida jobs.

Barbara Woodson: While Sink collected more than $8 million for herself.

It’s true that Sink was the president of NationsBank operations in Florida in 1997 when it acquired Barnett Bank. And as is the case with most large mergers, it resulted in the elimination of jobs. A Miami Herald story on Jan. 1, 1998, quoted a NationsBank official in its corporate headquarters in Charlotte, N.C., estimating that as many as 6,000 Florida jobs would be cut as a result of the acquisition. NationsBank subsequently merged with Bank of America in 1998. Financial disclosure forms suggest Sink was compensated a total of $8.8 million in 1999, 2000 and 2001. Our fact-checking colleagues at PolitiFact delved into these issues when they were raised during Sink’s 2010 run for Florida governor, and it rated those claims Mostly True.

But we were more interested in the ad’s follow-up claim, which again reverted back to Sink’s tenure as state CFO. In the ad’s kicker, Judy Peterson of Pinellas County, asks incredulously, “Sink made all that money and then used a state plane to get to a vacation in the Bahamas?”

Actually, no, she didn’t. At least, not the way that question makes it sound.

Sink’s use of the state plane was first highlighted in a Tampa Bay Times/Miami Herald investigation on June 24, 2009. The papers found Sink “has logged hundreds of flights on state planes, often including side trips for her and family members to their home near Tampa.” In all, the investigation found, Sink’s office spent $413,334 for state air travel between January 2007 and June 2009 — the second-lowest amount of any Cabinet official.

The story noted that state law requires Cabinet members to maintain a legal residence in Tallahassee, and prohibits them from using a state plane to commute to get to their state jobs.

Most germane to the American Crossroads ad was a trip Sink made in March 2008 from Tallahassee to Miami, where Sink toured Florida International University’s Wall of Wind exhibit and spoke to the South Florida Hispanic Chamber of Commerce, the Miami Herald reported. On the way back to Tallahassee, Sink directed the plane to drop her off in Fort Lauderdale, where she caught a Continental flight to the Bahamas (at her own expense) for a brief vacation. The cost of diverting the plane to Fort Lauderdale, according to the Miami Herald, was $248.

An ethics complaint was subsequently filed against Sink and other state officials alleging they misused state planes, but in December 2009, the state Commission on Ethics dismissed those complaints, saying the state law was too vague about what would be improper use of state planes.

In July 2009, CentralFloridaPolitics.com reported that Sink’s campaign for governor reimbursed the state $17,000 for 20 airplane trips to cities where she had both state business and campaign events.

Say what you will about Sink’s use of the state plane, she didn’t divert the state plane to the Bahamas at taxpayer expense. A graphic in the American Crossroads ad tries to push the claim closer into the technically true realm, saying, “State plane to help get to a vacation.” Notice the addition of the word “help.” But the impression left by Judy Peterson in the ad when she claims, “Sink made all that money and then used a state plane to get to a vacation in the Bahamas?” is hard to miss.

Jolly on Social Security

The Democratic-aligned House Majority PAC, meanwhile, is out with an ad featuring Elizabeth and Rod Snedeker, a Largo couple in their 80s, who express concern that Jolly would “risk Social Security money in the stock market.”

Here’s the text of the ad:

Elizabeth Snedeker: We’re the Snedekers; we’re partially retired.

Rod Snedeker: I was a minister, Elizabeth was a piano teacher.

Mrs. Snedeker: I’m still teaching lessons, but we really count on Social Security.

Mr. Snedeker: David Jolly lobbied for a group that wanted to risk Social Security in the stock market. He still wants it on the table.

Mrs. Snedeker: When the market crashed, we lost 40 percent of our savings. I don’t think it’s right for David Jolly to risk Social Security money in the stock market.

The ad clearly implies that the couple believes Jolly would risk their Social Security payments. And that’s clearly the Snedeker’s understanding as well. In an article in Creative Loafing Tampa Bay, Elizabeth Snedeker explained that she and her husband lost 40 percent of the value of their investments during the 2008 financial crash. “So when they talk about taking that money and putting it into the market, we don’t want to take that chance,” she said. “I’d be glad to talk to [Jolly], but this is the position that both my husband and I have taken and we feel relieved that they won’t touch Social Security and Medicare because we depend on it. We’re in our 80s, so. …”

The fact that they are in their 80s is the fundamental flaw in the ad’s claims. Jolly has repeatedly made clear that he has no intention of changing the Social Security program for people nearing retirement, let alone those already on Social Security, like the Snedekers.

We previously wrote about an ad from the Sink campaign that falsely claimed Jolly “lobbied for a group committed to privatizing Social Security.” Jolly lobbied for a group whose CEO personally supported a plan to allow workers to invest a portion of their Social Security payroll taxes in a private account. But the group took no formal position on the plan and did not lobby for it.

But this ad from House Majority PAC goes one degree further, with an elderly couple on Social Security claiming Jolly wants to risk their Social Security on the stock market. That’s not true, particularly for older people like those featured in the ad. According to a story in the Tampa Bay Times, Jolly said the idea of allowing people to invest Social Security payments in private accounts should be on the table for discussion — but only for younger people.

Tampa Bay Times, Jan. 31: Jolly said he does not subscribe to MacDougald’s defined contribution approach for everyone under 50, which means the government would make a set contribution to workers, who then would have investment options. He said it’s important to make sure Social Security stays solvent and pays up for everyone who has been vested in the system, which means people who have worked and paid in for 10 years.

For others — such as people who have not yet entered the workforce — there should be a wide-open discussion on reforming the program. He said everything should be on the table, including private accounts in which workers make their own investment decisions, as well as the important role of Social Security as a safety net.

“Anybody that has an intellectually honest conversation knows we have to have long-term entitlement reform in order to balance the budget,” Jolly said.

Jolly made that distinction on age clear in an interview on Bay News 9 in Tampa Bay as well.

Jolly, Dec. 8, Bay News 9: Yes, I agree with slowing the growth of these entitlement programs [including Social Security]. However, what we have to do is secure the promises we’ve made. Listen, I’m a fiscal conservative, right? But I also believe being a fiscal conservative means taking responsibility. The government has made promises to people – to the two of you [reporters on the show] and me as well – upon which we have made financial plans. I have made a financial plan based upon a promise the government made to me. I’m not too young for the government to still continue honoring that promise.

Using a couple in their 80s warning that Jolly would risk their Social Security payments on the stock market amounts to nothing more than a senior scare tactic.

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